Faisal Masud’s Post

What about Netflix? The power behind the Long-Tail is in the data and hyper personalization as you mentioned with Amazon, but many other big box retailers are just now learning the importance of customer data and recommendations, yet still haven’t quite harnessed the power of them. Is their anything suggesting how Netflix had success as a purely digital marketplace that bought the rights to, and sold viewership of, movies and shows using the long-tail idea powered by rec engines?

faisal masudWhat an enlightening article! Do you have examples of dropship model done right? Who are doing it the best?

So what does this mean for Fabric's marketplace SaaS offering?

Faisal, you raise an important issue of "why some marketplaces fail." And that's something I break down in detail in the article below. But with the right strategy marketplaces can improve profitability by 3x over eCommerce (Mirakl proprietary research) and are 1.7X more likely to experience market-share growth (McKinsey). Perhaps the "hype" is onto something.Ultimately, there is no magic bullet for scaling eCommerce. All models that get the right products into the hands of the right customers at the right time deserve consideration. That includes marketplace as well as the legacy model of drop ship (or both together). https://www.linkedin.com/pulse/why-marketplaces-fail-adrien-nussenbaum/?published=t&trackingId=WoGd%2F4QuRMOQFh936Xjfjg%3D%3D

Awesome article. I had no idea about Albertsons, Best Buy, and Barnes & Noble! It was also interesting to learn that Staples took a different approach when every one else was on the long train to nowhere. Endless aisles and fat long tail are fun to theorize about but not fun for the brands trying to realize the concept. Tight curation and alignment with healthy brand partners who will fulfill orders on your behalf is where it’s at. Platforms where brands can browse an “endless aisle” of highly curated suppliers/products and manage e-commerce partnerships through the same platform will make this realistic. In this case, the brand can walk the endless aisle rather than the customer, and have fun doing it due to the curated nature of the platform. Scaling platform curation is tricky though. It will be fun to see how that plays out.

faisal masud Thanks for the post. I think the goal posts have changed, even since 2020 when the latest example you gave of a failed marketplace was closed. The Marketplace pie is so much bigger now, retailers / brands would be foolish not to attempt to find new ways to increase their share. The technology (e.g. Mirakl Adrien Nussenbaum) needed to power a marketplace expansion to existing eComm channels is also more accessible now, reducing the upfront investment needed to make this leap. You hit the nail on the head though, when you mention Amazon not being a retailer. I think many of the more recent, successful marketplace ventures (e.g. B&Q) are looking at the new data now available to them, and how it can power their wider business, rather than just being focussed on increasing bottom line sales and margin.

Faisal has a great perspective. In a drop-ship model, the merchant is the seller of record and sets the price, while in the marketplace model, the supplier is the seller of record and sets the price. I would worry about a brand like Staples, Home Depot, or Walmart about the pricing mechanics vs. the core assortment. In addition, the lack of clear visibility of the fulfillment cycle returns and providing general CX support adds complexity. The other exciting call-out is the long tail analysis. Everyone has learned that it is an 80/20 model where a small subset drives sales. The most significant benefit of the tail is that more SKUs go to more potential views with SEO, and it's a learning tool for new product opportunities to add owned inventory, private label development, or enhance the store assortments for the OMNI players. At eBags, we sold on Amazon Market Place and through FBA. The results were dramatically better from a sales and margin perspective. The drop ship product should provide the intelligence to bring products into the fulfillment centers to improve costs and shipment times. For a smaller vendor, the marketplace is an easy option to get traction on new products. The dropship model is the winner for retailers.

Thanks for your thoughts, faisal masud. Agree with your thoughts on this. Many retailers were misguided in deploying marketplace. They allowed vendors/items that were counterintuitive to their brand and left consumers confused. It required new teams in conflict with the primary business owners while increasing other operational costs to support non accretive efforts. Dropshipping assortment managed by the primary business teams provides extended assortment, while also giving opportunities to test different products and brands that may end up in the main assortment if successful. Brands should be excited to work with retailers in a dropshipping capacity. It also helps retailers scale and utilize capital for CX and marketing. If it wasn't for dropshipping many retailers today wouldn't exist.

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Insightful. Looked into many of those as a part of a deep market research for Walmart Intl. Thanks, faisal masud 💡